Zim’s mining sector bleeds as YTD revenue falls

Zimbabwe’s mining sector is bleeding as revenue in the first seven months fell short of target

on the back of low prices commodity prices on the global market, foreign currency shortages and rolling power cuts that have resulted in ferrochrome producers more than halving their production.

This spells doom for the Zimbabwean economy, largely dependent on the extractive sector for the much needed foreign currency earnings to pay for power imports and other critical supplies to industry, agriculture, health, telecoms and food imports.

Minerals Marketing Corporation of Zimbabwe general manager Tongai Muzenda said last week that sales for the month of July amounted to US$165m compared to a budget of US$183 million, representing a 10 percent negative variance.

Cumulatively, for the seven months to July, total sales were US$ 1.067 billion compared to a budget of US$1.279 billion, giving a negative variance of about 16.5 percent. This comes after the single largest foreign currency earning mineral, gold, suffered a 30 percent knock in revenue earnings to US$65 million at the end of June.

“In terms of future there is variety of issues happening, we have a problem. One of the biggest problems besides the market itself is massive power cuts, fuel shortages and foreign currency shortages.

Those have been big contributors to poor production,” Muzenda said.

He however hopes sales to rise during this third quarter which started in July.

Muzenda’s optimism arises from the efforts being made by Energy minister Fortune Chasi to improve the electricity and fuel supply situation.

“As we speak, some of the ferrochrome producers have cut production by more than 70 percent so it’s a nightmare, but I am aware the Ministry of Energy is doing some work so that we have enough power for production,” he said.

“Unfortunately some prices have been coming off especially on chrome.”

Chrome concentrates and chrome ore were about US$40 million for July whereas for high carbon ferrochrome sales were US$194 million. High carbon ferrochrome sales missed the budget of US$219 million.

The biggest contributor for the total sales in the period under review is PGMs, which is the PGM concentrates and the PGM matte from the three producers-Zimplats, Mimosa and Unki, Muzenda said.

Part of Chasi’s solutions could increase Zimbabwe’s debt albatross as it emerged the country has found itself in a precarious agreement in which it could accrue up to US$1,3 million and close to US$40 million

monthly in energy import bills from South Africa’s power utility Eskom.

After having suffered from acute power shortages –with a deficit of about 800MW following low water levels at Zimbabwe’s main source of power, Kariba, that saw the country going for 18 hours without

electricity and effectively crippling industry—desperate Zimbabwe entered into an expensive power import deal with neighbouring South Africa in which Zesa pays US$0,14 per kilowatt-hour.

The cost translates to a maximum of US$56 000 per hour for 400MW and US$1,3 million per day.

Business Times reported last month that a powerful cartel comprised of top politicians and foreign minerals dealers close to the corridors of power is wreaking havoc in the country, mopping up gold though cash on delivery scheme across the country, starving official channels of the yellow metal.

Gold is a major foreign currency earner accounting for about 38 percent of the country’s foreign currency earnings.

In response the Reserve Bank of Zimbabwe with its Fidelity Printers and Refiners, government law enforcement agents and the judiciary are coordinating to weed out rogue elements in the gold value chain who are facilitating leakages and actors who are buying the gold illegally.

Information at hand shows that efforts have been made to capacitate the involved parties to take action against such malpractices with indications the Anti-corruption unit in President Emmerson Mnangagwa’s office could be heavily involved.

“They (the gold cartels) are cleaning the economy and were going to arrest them,” said a top official close to the implementation of strategies to stop gold leakages. “The systems are there to implement this.”